How many unsold homes in Fla? THIS many...

Posted by: Dean Foust on March 27, 2007

This report from the CBS 4 web site provides a snapshot on Florida’s housing market. This factoid says it all: “At the current sales pace, it would take nearly three years to sell all the condominiums on the market. For single-family houses, it would take almost two years.”

Given that overhang, it seems inevitableflamingos.jpg that prices decline. By how much in Florida, I don’t know (readers from south Florida, feel free to post your best guess here). Looking more broadly, Steven Krystofiak, the president of the consumer advocacy group the Mortgage Brokers Association for Responsible Lending, predicts that housing prices nationally will tumble between 5% and 10% from current levels by year’s end and to extend those declines to between 15% and 20% by the end of 2008. Krystofiak’s prediction is scary, and may be influenced by the fact that he probably deals day-in-and-day-out with distressed borrowers who are having to sell their homes at fire sale prices or are being foreclosed upon.

Yale economist Robert Shiller, whose book Irrational Exuberance accurately predicted the popping of the Internet bubble, predicts a slow bleed: According to this report in this week’s Barron’s (paid registration may be required to view article), Shiller still expects a “cumulative 20% to 30% decline in nominal (non-inflation-adjusted) prices over the next five to 10 years. In other words, the slide is unlikely be sudden; prices could fall instead by, say, 2% annually for 10 years.”

If home prices do decline—be it quick or even slowly over 10 years as Shiller predicts—I think there are going to be many consequences, including some that few of us are thinking about. I’ll now circle back to Florida, where the housing boom lifted property values—and property tax assessments. As this story in the Bradenton (Fla.) Herald reveals, increases in property-tax revenues since 2000 have been dramatic: 178% for Miami-Dade County, 123% for Fort Lauderdale, 82% for Broward County and 108% for Miami, at a time when government income from other sources grew far slower.

That gravy train enabled local governments to increase spending: In Miami-Dade, the county’s 30,000 employees received an average salary increase of 29% between 2000 and 2006 — while the inflation rate rose about 18%, according to the story. What happens if prices – and assessments – turn negative?

Reader Comments

syncmaster

March 27, 2007 2:33 PM

What happens? Taxes stay the same or only decrease nominally. The beast must be fed.

Sally

March 28, 2007 12:32 PM

Let's face it, during the RE boom, cities/counties made a mint on transfer fees, and of course increased property taxes. Now that the pendulum has swung back (so to speak), no way are those cities/counties going to decrease their fees and taxes. You notice the resistance in State legislatures to reconfigure taxation so that property tax is decreased and income tax increased. Yeh right, the beast must be fed.

Kaushik Sirkar

March 29, 2007 4:00 AM

Do I expect such a long term decrease in home values? Hard to say. Unlike Mr. Shiller, I don't have a crystal ball. But I will say, it sounds like Florida is getting hit the worst! I did see some locales in Florida with double digit price decreases ALREADY. Certainly sounds worse over there an here in AZ!

Kaushik Sirkar, Chandler, AZ Realtor®
http://www.homesphx.com
http://www.activerain.com/blogs/ksirkar

Tim Batey

March 29, 2007 1:41 PM

I am continually amazed with the very broad strokes which the real estate market is painted. Do to the very nature of the beast, homes and homes sales vary based on location and localized economic drivers. For example in our area of Florida (NW FL), the current level of home for sale under 170K is less than 3 months ,at the current obsorbtion rate. I am very well aware of locations in Florida where it will be more than 3 years for all the inventory to cycle. We should probably better define our target when discussing real estate.

Erin

March 29, 2007 8:56 PM

Where is CBS 4 located? In Miami. Of course real estate is overvalued in South and Western Florida! Blame it on condo conversions and triple-digit appreciation in a year's time! When you spread your doom and gloom, keep it regionally specific. Travel a few hours north to Marion and Alachua Counties and you'll find a completely different story - properties are still selling and we enjoy a lower cost of living.

Michael Emilio + Miami Real Estate

April 4, 2007 10:14 AM

"At the current sales pace, it would take nearly three years to sell all the condominiums on the market."

For those in living in South Florida, you'd know why. There has been such an EXPLOSION in condo development it's unbelievable. Huge high-rise condos sprouting up adjacent to each other competing for tenants with perhaps only 20% of the units sold pre-construction so now the rest are sitting vacant.

It's also no secret that homes have been overvalued in the past few years. That's no one's fault - that's the real estate market at work. It's not a bursting real estate bubble - it's a normalization of the market - that's all. Homes are no longer selling at overinflated prices - they are now dropping to a more accurate representation of their true value. Buyers who were patient are now going to reap the rewards.

- MichaelEmilio.com

Pamela Smith

April 13, 2007 10:17 PM

In Miami-Dade County houses below $350.000 and over $850.000 are selling in a shorter period of time then the $400.000 to $825.000. Houses over $480.000 have been on the market for a year and a half and I don't seem to see much change in that. The condo market and the taxes are a huge factor. When someone says that we could not do anything about the inflated prices they need to examine their thinking. Anyone buying could have said no and anyone selling could have said I refuse to abuse... Some of us would like to leave Miami but don't have to, so we will just wait it out, or just stay another 26 years and see if there is a moral change on the horison of the future.

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BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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